• The SEC is considering an appeal against the ruling that declared XRP as non-security.
• Crypto lawyer John Deaton argues that it might be difficult for the SEC to prove a common enterprise between Ripple and secondary XRP holders.
• The SEC claims that the Ripple ruling imposes new, unfounded requirements on the Howey Test.
Ripple SEC Lawsuit Update
The world of cryptocurrency is abuzz again with news of Gary Gensler’s Securities and Exchange Commission (SEC) team contemplating an appeal against the ruling which classified XRP as a non-security. Influential cryptocurrency attorney, John Deaton, expressed his thoughts on this development via Twitter which lies in ‘Footnote 13’, where the court determines the existence of a common enterprise solely between Ripple and its institutional buyers.
Common Enterprise Conundrum
Deaton holds the view that the SEC will face a steep climb in proving a common enterprise connection between Ripple and secondary market XRP holders, even if they triumph in appealing Judge Torres’s ruling. He emphasizes that the SEC’s hypothesis in this case was convoluted and unconvincing, leading to their defeat.
Howey Test Hurdle
The Howey Test is a set of criteria established by Supreme Court to determine whether certain transactions qualify as investment contracts or securities under U.S law which governs financial securities transactions such as stocks or bonds. The SEC claims that Judge Torres’s decision imposes new, unfounded requirements on this test which could set troubling precedents for similar cases in future.
Ripple vs Others
It remains unclear at this stage whether other projects such as Ethereum (ETH) are also likely to face similar scrutiny from regulatory authorities who may appeal similar decisions classifying ETH or other popular cryptocurrencies as non-securities. It will be interesting to see how different regulators across jurisdictions decide to tackle these issuesgoing forward with respect to both existing and upcoming projects within cryptospace .
The outcome of any potential appeal by the Securities and Exchange Commission remains uncertain at this stage but it could potentially have far reaching implications on how cryptocurrency projects conduct business within US jurisdiction going forward if successful